After initiating trade wars and tech wars but finding itself helpless against China, the United States has waged a financial war, aggressively raising interest rates, and triggering the dollar tide.

Historically, each time the dollar tide is unleashed, it signifies that several countries are about to suffer.

The United States will not cease until the targeted countries' financial systems collapse and serve as nourishment.

This round is clearly aimed at China, as evidenced by the fact that when the trade war began, American politicians almost lost their ability to speak without mentioning China; the entire national policy of the United States has long been centered around containing China's rise.

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Even if it cannot collapse China's financial system, it will at least sacrifice a few pro-China countries as offerings; otherwise, the United States would not have launched the dollar tide.

Because the dollar tide can only be unleashed by causing the dollar interest rates to plummet and soar, this move is indeed a significant threat to developing countries, but it is essentially a self-harming strategy, disrupting the healthy operation of the entire U.S. economic system.

Since the first interest rate hike by the dollar in March 2022, it has been two and a half years now, and this round of dollar tide has achieved nothing.

China has not collapsed, pro-China countries have not collapsed, and even neutral countries have not collapsed; instead, pro-American countries are on the verge of collapse.

The tug-of-war between China and the United States is like a contest to hold one's urine, to see who will be the first to wet their pants.

On September 18, 2024, the Federal Reserve decided to cut interest rates, and in one go, it cut by 50 basis points, declaring the end of this contest.

What can the dollar rate cut bring to China?

If you reverse the question of what the dollar rate hike can bring to China, you will find out what the dollar rate cut can bring to China.

China is a developing country with high investment returns, and it is natural that its interest rates should be higher than those of developed countries.

China's interest rates have long been about 3% higher than those of Europe and Japan, and about 1% higher than those of the United States.

However, in this round of the dollar tide, the United States first reduced the interest rates to zero before instantly raising them to 5%, wildly disturbing the global flow of dollars, and then maintaining an interest rate far higher than that of China.

Now, it is impossible to find financial products in China with a return of more than 3%, and the deposit interest rate is even lower, at just over 1%.

However, the benchmark interest rate for the dollar is over 5%.

If you are a foreign investor holding dollars, what would you think?

Don't even talk about foreign capital; even domestic capital, doing foreign trade, with a large amount of dollar payments, if deposited in a U.S. bank at an interest rate of 5%, and brought back to the country for exchange, it would only be less than 2%.

Would you choose to "postpone the exchange"?

Capital seeks profit, and this has nothing to do with patriotism.

Even patriotic foreign trade enterprises will make choices in the face of such a huge interest rate difference.

If the money is small, it doesn't matter, but if the capital scale reaches 100 million U.S. dollars, you can calculate how much this interest rate difference is worth, and business operators cannot ignore it.

Before 2020, China's interest rates were higher than those of the United States, and foreign trade enterprises would immediately exchange dollars for RMB upon receipt, because holding RMB had a higher interest rate.

Holding dollars for one more month would result in more interest lost, not to mention the risk of exchange rate fluctuations, so as long as the dollars in the foreign account were sufficient.

After 2022, with the dollar interest rate as high as 5%, foreign trade enterprises could earn more interest by delaying the exchange of dollars for one month.

This is without considering the factor that the dollar is continuously appreciating.

As long as the RMB in the domestic account is sufficient, they will not exchange, and they will exchange a little bit of RMB for a little bit of dollars when needed, earning more interest by delaying for a month.

In the past two years, there has been a large amount of dollars that have not been exchanged and are floating outside, and this is just domestic capital.

Foreign capital, which is originally European and American enterprises, is even more crazy about moving their liquid funds to the United States.

Together, this constitutes "foreign exchange loss," which is also the reason why China has been short of "money" in the past two years despite having enough supplies.

The macro manifestation is deflation, with prices continuing to fall, and a shortage of "money" everywhere.

Inflation is difficult to solve, but deflation is actually easy to solve.

Because developing the economy is very difficult, but printing money is not difficult.

The gold dollar bill easily inflated tens of thousands of times, and deflation does not exist at all.

It is extremely easy for any country to change deflation to a moderate inflation of 2%, but China has not chosen to solve the problem by printing money.

Because printing money can easily eliminate deflation, but it will bring about a decline in the exchange rate, which means that the RMB will depreciate internationally, which is very unfavorable to the internationalization of the RMB that China is promoting.

Only a strong RMB can make other countries feel at ease.

In the face of the absurd interest rate of 5% for the dollar, money all over the world is rushing to the United States, and almost all countries have chosen to raise interest rates to curb the loss of foreign exchange.

As long as the domestic interest rate is high enough, there is no need to worry about the withdrawal of capital.

The world has raised interest rates, but China has not raised interest rates, and not only has it not raised interest rates, but it has also reduced interest rates.

Because China's economic environment should have reduced interest rates, if it raises interest rates to fight against the loss of foreign exchange, it would be just right for the United States, at least it is a manifestation of being soft on the United States in the financial war, and other countries in the world would think that at least in the field of financial war, China is not as good as the United States, and its domestic economic policy cannot resist the influence of the United States.

China will never raise interest rates, and then the currency value will not be able to stand, relying on a strong trade surplus to barely maintain the exchange rate at around 7, and at the same time, it wants to promote the internationalization of the RMB and dig up the roots of the dollar globally.

This is a typical case of wanting both, even Europe and Russia have chosen to raise interest rates crazily to maintain the stability of their own foreign exchange when facing the dollar tide, but China not only does not raise interest rates, but also wants both.

Relying on the absurd trade surplus, we have finally achieved the goal of wanting both, but at the same time, we also ask to leave room for the exchange rate when printing money, that is, wanting both and still wanting more, which cannot be done.

Moreover, printing money is not a good thing in itself, and as long as the dollar interest rate returns to normal and funds begin to withdraw from the United States, China's deflation will naturally be lifted.

If we choose to print money to solve the deflation problem at this time, it will also cause inflation in China when the dollar cuts interest rates, and then we will have to work hard to recover the RMB to solve the inflation.

This is why printing money can solve deflation, but China resolutely does not print money.

The dollar rate cut is not only a cut of 50 basis points, once the rate cut cycle is opened, it will continue to cut interest rates.

According to the statements and attitudes of Federal Reserve officials, there will be two more rate cuts before the end of this year, each by 25 basis points, which means that the dollar will cut interest rates by about 1% in 2024.

The rate cut will lead to a weak dollar, and the interest rate is still falling continuously.

After calculating the account, the economic benefits of delaying the exchange will become smaller and smaller, until one day, delaying the exchange will become a loss-making behavior.

At that time, the foreign trade surplus that has been delayed for exchange in the past two years will start to be brought back to the country for exchange continuously, which will lead to the amount of exchange in our country being far greater than the foreign trade surplus in the same period.

The behavior of foreign capital will be similar to that of these foreign trade domestic enterprises.

With the opening of the dollar rate cut cycle, they will gradually withdraw their funds from the United States, and the lower the dollar interest rate, the faster the withdrawal speed.

The money withdrawn will flow to developing countries around the world, and a large part of it will go to China.

In other words, under the condition that China's material production capacity remains unchanged, the "money" in the Chinese market will suddenly become more.

The United States' dream of launching the dollar tide is to blow up China's economy, to create a financial crisis in China, and to let the price of Chinese assets fall wildly to a very low price, and then the dollar will cut interest rates to acquire.

This dream has not been achieved by the United States.

Although it has formed a clear suppression on Chinese assets, it is still far from creating a financial crisis in China, and the resilience of China's system is far beyond the United States' imagination.

After the dollar opens the interest rate cut cycle, the money that foreign and domestic capital has been sucked into the United States will return to China, and the falling asset prices have been stabilized.

If the asset price wants to rise, the dollar interest rate needs to be lower than the Chinese interest rate, and the Chinese assets themselves need to generate a profit effect, but the worst situation has passed.

What can be directly confirmed is that once the dollar opens the interest rate cut cycle, the dollar's currency value will definitely fall, and the RMB's currency value will definitely rise, and the amount of exchange will suddenly surge.

Promoting the internationalization of the RMB requires the RMB's currency value to be stable, and it cannot fall sharply, but it also cannot rise sharply.

Therefore, when the RMB's currency value rises to a certain extent, the People's Bank of China will definitely release money to stabilize the exchange rate.

In other words, it is necessary to release water, either by cutting interest rates or reducing reserves or directly printing money, otherwise, it is impossible to suppress the RMB's currency value.

To put it more simply, by next year, the deflation problem will definitely be resolved, and the situation of continuous decline in prices and wages will no longer exist, and everyone's income and consumption situation will improve.

This is the most basic benefit, and even the most conservative prediction can come to this conclusion, and the best prediction is that China's asset prices will rise.

The actual final result may be in the middle.

The topic of "foreign capital fleeing China" began to be intensively hyped in April 2022, and there has never been a related topic before.

The United States began to raise interest rates in March 2022, and it is very simple to see the correlation between the two.

The United States is so eager for foreign capital to flee China, and with the strong attraction of a 5% interest rate, it has indeed attracted a lot of foreign capital, but its strategic demand has not been achieved.

Once the dollar cuts interest rates, the United States will have done all its work in vain, paying a huge cost without any strategic results, and it is undoubtedly a complete defeat.

In this round of the low blood sugar war between China and the United States, the higher the interest rate in the United States, the lower the interest rate in China, both countries are proving to the world who is the center of the global economy.

China is very uncomfortable, but the United States is even more uncomfortable, because the first one to hold on is the United States.

The significance of this round of the United States cutting interest rates is extraordinary, the greatest significance is that it even represents the results of the tug-of-war between China and the United States.

Both China and the United States are nuclear powers and dare not directly fight a hot war with each other.

Europe, Russia, and India all hope that China and the United States will fight directly, but China and the United States do not want to have a direct hot war, and let others take advantage of it.Under the premise of not initiating a hot war, the United States has waged trade wars and technological wars, but without gaining any advantage.

Consequently, it resorted to its strongest suit: financial warfare.

Although the United States' financial warfare capabilities are formidable, it is not something that should be easily employed, as financial power is quite intangible, built on a century of currency credit.

Weaponizing finance is essentially overdrawing the foundational credit of the US dollar.

The United States' decision to wage financial warfare is akin to staking the nation's very foundation on the gambling table.

The result, surprisingly, was not a victory, nor did it achieve any tangible gains.

After a long period of holding out, the anticipated collapse of China did not occur, and the US economy could no longer sustain itself, leading to a rate cut.

The US cutting rates by 25 basis points was already a sign of yielding to China, but then it cut rates by 50 basis points at once.

Some people have suggested that this is the United States giving up and preparing to start a hot war with China.

This is purely an overthinking.

The greatest disparity in power between China and the United States was in 1991, when the Soviet Union collapsed, and that year would have been the most advantageous for the United States to attack China, but it did not dare.

In every subsequent year, the power gap between China and the United States has been narrowing, but the power gap in each year was far greater than this year.

In 1991, China was extremely poor, and the United States did not dare to act.

In 2001, China was particularly poor, and the United States did not dare to act.

In 2011, China was very poor, and the United States did not dare to act.

By 2024, when China's national strength has skyrocketed, would the United States dare to act?

The United States is a nuclear power, and China does not want to start a hot war with the United States because it fears the use of nuclear weapons by the United States.

But don't forget, China is also a nuclear power, and the United States is even less willing to be subjected to nuclear weapons from China.

The United States is not in a situation where it cannot survive; after all, the entire Western Hemisphere is within its sphere of influence, and China, for now, is only interested in the eastern side of the Pacific Ocean and has no interest in crossing the Pacific Ocean.

Therefore, the United States is not likely to provoke a hot war, as the US military is not insane.

Moreover, ensuring that a nuclear war is not initiated, if the US military dares to fire the first shot and engage in a small-scale conventional military confrontation, it would be a tremendous boon for China, as it could simply and clearly prove America's weakness to the world.

The United States is not willing to start a hot war precisely because it is not confident in winning, which is why it tirelessly engages in trade wars, technological wars, and financial wars, as it feels more certain of victory in these areas.

If the United States cannot even win a financial war against China, no sane American leader would consider starting a hot war, as it would be tantamount to suicide.

The reason the United States directly cut rates by 50 basis points was out of practical consideration, because cutting rates by 25 basis points or 50 basis points both acknowledge the failure of financial warfare.

Given this, it is naturally most advantageous to directly cut rates by 50 basis points, considering the actual state of the US economy, as the United States should have cut rates long ago, and it has been holding out in the hope of a miracle.

The Chairman of the Federal Reserve insists that the US economy has not entered a recession, even though the United States has cut rates by 50 basis points at once, the US economy has not entered a recession.

So why did the Federal Reserve cut rates?

To provide a transfusion to the Chinese economy?

In fact, every large-scale rate cut by the Federal Reserve in history has led to a recession.

The logic here is not that rate cuts cause economic recessions, but rather that the Federal Reserve detects that the US economy has already fallen into a recession and thus chooses to cut rates.

The 2008 financial crisis, when Lehman Brothers collapsed in September 2008, but the Federal Reserve actually started cutting rates in September 2007.

The fireworks of the US economy are yet to come; the Federal Reserve still has its basic level of competence and will not wait for the crisis to actually occur before taking action to cut rates.

Another point to note is that the initiation of this round of dollar tidal waves, while indeed targeting China when its economy needs rate cuts, is more fundamentally rooted in the trillions of dollars that Trump issued during the pandemic, and the trillions more that Biden issued upon taking office.

The flood of dollars has caused hyperinflation, forcing the Federal Reserve to raise rates to absorb these dollars.

High interest rates can temporarily absorb these dollars, but only temporarily, as these dollars have not been canceled; the Federal Reserve is simply paying a 5% cost to make these dollars temporarily disappear for a year.

Once the United States cuts rates, these over-issued dollars will re-emerge, and the flood of dollars will once again flow to the world.

To stabilize the value of the dollar, the over-issued dollars must all obtain equivalent anchoring objects, which means that countries must take over these two trillions, totaling nearly ten trillion dollars, and provide enough assets to back the credit of so many dollars.